David Einhorn makes a long, detailed presentation that raises seemingly legitimate questions about the value placed by St. Joe on its real estate assets (substantially all of its assets). In a nut shell he believes that the company is probably only worth $9-10 a share or nowhere nears its book value of $25ish. He asks: If the balance sheet fairly reflects the value of this real estate then why does St. Joe incur losses (sometimes large) when it makes bulk real estate sales? Those losses/write-offs would appear to be empirical proof that the carrying value of the real estate on the balance sheet is too high.

St. Joe responds by saying that it stands by its valuation methodology. It does not disclose the methodology along with specific examples. Kind of a "trust us" and that's it.

Mr. Berkowitz states that he trusts management and that St. Joe is undervalued and that he would be happy to buy the whole company at current prices...but there is a standstill agreement..and so he can't.

The SEC decides to take a look under the hood of St. Joe's balance sheet.

St. Joe lifts the standstill for Berkowitz who proceeds to buy a nominal number of additional shares. Nominal being a lot less than the rest of the company.

Berkowitz joins the board at St. Joe. St. Joe hires Morgan Stanley to explore strategic alternatives to max shareholder value etc.. So now Berkowitz is a "seller". Stock falls. It was grossly undervalued in November and now he wants to sell?

On Bloomberg, Berkowtiz says he learned something new while on the board which he can't disclose and that he must act to "stop the bleeding."

The whole discussion has shifted from the correct value of St. Joe's land to saving the land and other assets from bad management. Management in turn is looking for control premium etc.. What happened to St. Joe being wildly under appreciated for its unique assets? Why hasn't Berkowitz been a buyer?

Berkowitz is acting like an investor trying to salvage an investment gone awry. His initial "Thank you! for shorting St. Joe so I can buy more on the cheap" is long gone.

4:24 pm February 16, 2011

Jeff Mattthews SnTu wrote :

When Berkowitz was free to buy more stock, he didn't. When he got on the board, he put the company up for sale. He is a seller not a buyer.

The rift with management and the proxy fight looks a lot more like someone trying to salvage an investment gone awry than the original swagger inherent inhis initial response of "thank you for shorting St. Joe."

7:37 pm February 16, 2011

Doug wrote :

A huge chunk of Florida, much of it prime coastal, in an economy that is debasing its currency and printing money wildly. There will be a half dozen groups willing to pay the current market price. I calculate I own 10-20 of those acres myself-that's fine with me.

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